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7110 s10 qp 22 .pdf


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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

* 0 7 5 0 4 9 7 4 2 9 *

7110/22

PRINCIPLES OF ACCOUNTS
Paper 2

May/June 2010
2 hours

Candidates answer on the Question Paper.
No Additional Materials are required.
READ THESE INSTRUCTIONS FIRST
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for any diagrams or graphs.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
Answer all questions.
You may use a calculator.
Where layouts are to be completed, you may not need all the lines for your answer.
The businesses mentioned in this Question Paper are fictitious.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
For Examiner’s Use
1
2
3
4
5
Total

This document consists of 12 printed pages, 6 lined pages and 2 blank pages.
DC (SM) 19654/2
© UCLES 2010

[Turn over

2
1

Leung commenced business on 1 April 2010 with inventory (stock) $500 and bank $6000.
Leung also has a bank loan of $3500 which is repayable in full on 31 March 2013.

REQUIRED
(a) Calculate on 1 April 2010, the
(i)

owner’s capital ..........................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
.............................................................................................................................. [1]

(ii)

capital employed ......................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
.............................................................................................................................. [1]

In the first days of trading, Leung completed the following transactions.
(i)

Paid rent, $200, by cheque.

(ii)

Purchased goods, $1500, on credit from Ying.

(iii)

Sold goods costing $1000, for $1800, on credit to Tung.

(iv)

Purchased office equipment, $4000, paying by cheque.

(v)

Paid his account to Ying of $1500 and was allowed 4% cash discount.

© UCLES 2010

7110/22/M/J/10

For
Examiner’s
Use

For
Examiner’s
Use

3
REQUIRED
(b) Complete the table below. The first item has been completed as an example.
Item

(i)

Book of prime
entry

Effect on current
assets

Effect on current
liabilities

Effect on capital

Cash book

–$200

No effect

–$200

(ii)
(iii)
(iv)
(v)
[16]

© UCLES 2010

7110/22/M/J/10

[Turn over

For
Examiner’s
Use

4
On 31 May 2010, Leung extracted the following balances from his books.
$
6 650
4 600
3 500
1 200
2 100
4 000
1 750 Dr
150
3 850
?

Gross profit
Inventory (stock)
Bank loan
Trade Receivables (debtors)
Trade Payables (creditors)
Office equipment
Bank
Discount received
Rent and expenses
Capital

REQUIRED
(c) Prepare the trial balance at 31 May 2010.
Trial balance of Leung at 31 May 2010
Dr
$

Cr
$

..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
.................................................................................................................................... [10]
[Total: 28]

© UCLES 2010

7110/22/M/J/10

5
2

Tsang is in business buying and selling goods on credit. The following information is available
for the month of March 2010.
Revenue (sales)
Inventory (stock) 1 March
Trade payables (creditors) 1 March
Payments to suppliers
Discount received
Inventory (stock) 31 March
Ordinary goods purchased
Wages & expenses

For
Examiner’s
Use

$
65 000
3 400
1 700
47 000
300
2 900
47 900
2 500

REQUIRED
(a) Prepare the purchase ledger control account showing the balance of trade payables
(creditors) at 31 March 2010.
Purchases Ledger Control account
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [5]
Included in the expenses are the wages paid to Susan, who works for Tsang. In the month of
March, Susan worked 160 hours for which she was paid $5 per hour, and 20 hours overtime,
for which she was paid time and a half.
Tax and social security deducted from her pay was $165. Tsang also had to pay $90 for
employer’s social security contributions. The total tax and social security is to be paid to the
tax authorities on 30 April 2010.
REQUIRED
(b) (i)

Calculate Susan’s net pay for the month of March.
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
.............................................................................................................................. [2]

© UCLES 2010

7110/22/M/J/10

[Turn over

6
(ii)

Calculate for Tsang, the total cost of employing Susan for the month of March.
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
..................................................................................................................................
.............................................................................................................................. [2]

(c) Prepare for Tsang, the journal entry on 31 March 2010 to record the wages and
statutory deductions. A narrative is not required.
Dr
$

Cr
$

..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [3]
(d) Prepare the income statement (trading and profit and loss account) for the month of
March 2010.
Tsang
Income Statement (Trading and Profit and Loss Account)
for the month ended 31 March 2010
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]
[Total: 18]
© UCLES 2010

7110/22/M/J/10

For
Examiner’s
Use

For
Examiner’s
Use

7
3

Chan and David were sole traders with the following assets and liabilities on
31 March 2009.

Intangible assets (goodwill)
Non-current (fixed) assets
Inventory (stock)
Trade receivables (debtors)
Trade payables (creditors)
Cash (bank)
Loans repayable within 12 months
(bank overdraft)
Capital

Chan
$
30 000
23 000
7 000
3 000
5 000

8 000

David
$

10 000
5 000
4 000
6 000
2 000


50 000

15 000

On 1 April 2009 Chan and David formed a partnership, Newstart. They entered into the
following agreement:
1

Intangible assets (goodwill) would not appear in the books of the new partnership.

2

No interest would be allowed on capital.

3

Interest would be charged on drawings at the rate of 5% of the balance at the end of the
year.

4

Salaries would be paid at the rate of: Chan $8000 per annum and David $7000 per
annum.

5

Profits and losses would be shared in the ratio Chan and David 2:1.

REQUIRED
(a) Explain the term goodwill and give one example.
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [2]
(b) State two accounting principles (concepts) which supports goodwill not being included
in the balance sheet of a business.
(i)

..................................................................................................................................

(ii)

..............................................................................................................................[4]

© UCLES 2010

7110/22/M/J/10

[Turn over

8
(c) Calculate the capital of each partner, Chan and David, after writing off the goodwill on
1 April 2009.
(i)

Chan .........................................................................................................................
..................................................................................................................................
..................................................................................................................................
.............................................................................................................................. [2]

(ii)

David ........................................................................................................................
..................................................................................................................................
..................................................................................................................................
.............................................................................................................................. [2]

(d) Prepare the balance sheet of Newstart at 1 April 2009.
Newstart
Balance Sheet at 1 April 2009
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [6]

© UCLES 2010

7110/22/M/J/10

For
Examiner’s
Use

9
The following information is available at the end of the first year of trading of Newstart on
31 March 2010.

Profit for the year (net profit)
Drawings

Chan
David

For
Examiner’s
Use

$
10 250
15 000
20 000

REQUIRED
(e) Prepare the profit and loss appropriation account for the year ended 31 March 2010.
Newstart
Profit and Loss Appropriation Account for the year ended 31 March 2010
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
..........................................................................................................................................
...................................................................................................................................... [5]
[Total: 21]

© UCLES 2010

7110/22/M/J/10

[Turn over


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